Management Letter etrend web site
November, 2000
Message to Shareholders
Just to keep you apprised of recent developments regarding Financial Intranet:
As previously announced, we are extremely pleased to have been approved for our Chinese business license after a grueling seven-month application period. This license should allow us to move forward and formalize agreements in China as we begin to utilize the assets we purchased in March with the establishment of E-Trend Technology. We now hope to continue to execute on the operational plan for that subsidiary that we established when we purchased the assets, which include the e-mail magazine and web sites that now are used by almost 1,000,000 (up from 800,000) of the 12,000,000 estimated Chinese Internet users. We in fact have in hand contracts that begin in the fourth quarter that should bring us to break-even now, with the prospects for profitability in China imminent, and are in the process of opening a subsidiary office for our Chinese division in the first quarter of 2001 in Yueyang. This office will focus on web development, systems integration and network and management administration. Presently, there is no competition in this territory and we hope for a very quick ramp-up.
We have filed a preliminary proxy statement with the SEC with an eye towards having a special shareholder's meeting in mid-December to cover primarily the authorization of additional shares of common stock. This move is necessitated by the fact that our share price has been hit very hard over the past few months, and we need a currency to enable us to fund the company's operations as a public entity in the United States and its ongoing capital requirements in China. We also want to be able to react quickly in response to potential acquisitions, as our goal of investing in synergistic companies has been stalled to some extent due to the absence of a currency to use for the acquisitions. We are, however, actively exploring several potential acquisitions, and although are still in the talking and due diligence phases, do feel confidant that we will be able to engage in some type of deal with the existence of additional shares. The share increase authorized at the last shareholder's meeting turned out not to be adequate to fund acquisitions, operations and note conversions as the share price was hurt during the recent market turbulence causing more dilution than we had hoped for.
Our second quarter 10-QSB indicated that we had enough funds to take us through the third quarter. We were able to conserve cash since then, and have also been funded for the short term going forward through the issuance of additional convertible debt. You may note in the preliminary proxy that there has been some dilution since the end of the second quarter; this has been due to both the conversion of the debt that was on the books as of June 30, 2000 of $950,000 as well as the conversion of new debt of $190,000. And with the share price falling to the level that it has, the conversion terms were not kind with respect to higher than anticipated dilution.
We had earlier indicated that we wanted to change the name of the company to E-Trend based on the Chinese subsidiary that is currently our primary operation. We cancelled the special shareholder's meeting that we had called due in part to our reluctance to spend the funds required by such a meeting given our financial condition, and also because we may want to re-think the name of the company until we can determine whether or not we want to go forward with any of the potential acquisitions that we are currently exploring.
As more developments occur, and as I return from China hopefully with more news, we will keep you updated as quickly as possible.
FNTN Management |
